I've read in various other threads within these forums that Xenosaga I is a beast to run, and that it is usually video card limited.

Well, I tried to run the game, and as many have encountered, suffered slowdown during the cutscenes and certain battles. I fired up GPU-Z and found that my video card was still operating in low power 2-D mode.

After forcing it to Performance 3-D mode (and rebooting), I tried again. No performance gains were noticed, while GPU-Z showed I was now operating at Performance 3-D clocks. Regardless, GPU-Z showed only 115 MB of memory being used, both when in low-power 2D mode, and in performance 3D mode, which certainly doesn't suggest the video card is being strained in any way.

Well, at 40 FPS during in-game engine cutscenes (the actual CGI ones run just fine it seems), the slowdown is annoying, but serviceable. At some point, I decided to shift to Software mode (DX 10), just to see if that made any difference. It didn't. In fact, I had a slight increase in performance based on my FPS going up by ~5 points. I tested this by running back and forth in a hallway that would cause me slowdown. After doing it 10 times with software mode enabled, vs hardware mode (DX 10), it was official: Software Mode was actually giving me better FPS.

The combination of the the things I have just described leaves me wondering how this game could possibly be GPU limited. :/ Is my GPU actually being used at all? :/

My relevant stats are:

GPU: GTX 460
CPU: i7 3.06 GHz

gsdx using DX 10 Software/Hardware modes with native resolution and no interlacing.

Xenosaga is cpu limited, it goes nuts with the geometry.
Xenosaga 2 and 3 are vram limited (without 8bit textures enabled) and gpu limited (when large fire or fog effects are rendered with a high upscale enabled)

It's not GPU limited, it's CPU limited...software mode being faster is strange but as far as I know it's one of the typical CPU limited games, except for Mech battles where the GPU is being pushed alot.